Must-Read: Remember, relative to Fed beliefs less than four years ago, we have already seen 75 basis points of tightening relative to the benchmark of the estimated natural rate:


The more likely it is that we are in a régime of secular stagnation, the more important it is to take the 2%/year inflation target as an average rather than a ceiling, and the less-wise is the Federal Reserve's expressed commitment to start raining interest rates come hell or high water. The markets appear to think--quite reasonably--that the Federal Reserve is gradually moving month-by-month toward a more reality-based Larry Summers-like view of the macroeconomic situation, and that when December comes around the current FOMC consensus for raising interest rates then will have sublimed away.

And if the market is wrong, the most likely reason for it to be wrong is if the Federal Reserve decides to be contrary and to stop its ongoing rethinking process, just to show that it can and that it is boss...

Torsten Slok: DB: Expect More Hawkish Fedspeak: "Before Yellen’s speech last week, the probability of a rate hike by the end of 2015 was 42%...

...Today it is 41%. The market continues to believe that the Fed will not hike rates later this year despite 13 out of 17 FOMC members expecting a hike in 2015. Why does the market not believe the Fed? One reason is likely that the Fed for several years now has been too optimistic... has had to revise down their forecasts of not only near-term growth but also longer-term growth prospects.... This one-way revision in forecasts over many years has probably had an impact on how market participants interpret Fed communication.... We continue to expect a rate hike in December and we continue to expect Fedspeak in the coming weeks will repeat their expectation of liftoff coming in 2015..